In 2004, government introduced National Pension Scheme (NPS) and made mandatory for all Central government employees.
New Delhi: The government denied possibility of reintroduction of Old Pension Scheme (OPS) for government employees, given a written reply in the Lok Sabha. OPS was replaced by National Pension Scheme (NPS) in 2004, for a defined benefit pension given to government employees. A defined benefit may be a type of pension, which is fixed and decided with reference to number of years of service and compensation.
In 2004, government introduced National Pension Scheme (NPS) and made mandatory for all Central government employees. It was later extended to the state government employees and to the private companies. In a few cases, some government employee organisations had opposed the NPS since it does not give a fixed pension sum. There was an assumption that government may reintroduce OPS for Central government employees based on this opposition. However, the government has immovably laid any theory in this direction to rest.
The government gave two reasons for its refusal to reintroduce OPS. First, it pointed to a “rising and unsustainable pension bill" and said that “the government had made a conscious move to shift from the defined benefit, pay-as-you-go pension scheme to defined contribution pension." Second it said that “the transition also helped in freeing the limited resources of the government for more productive and socio-economic sectoral development".
In the Budget 2019, contribution to NPS increased from 10 per cent to 14 per cent for Central government employees. It also allowed Central government employees to invest in NPS Tier 2 and get the benefit of tax deduction under Section 80C. Government also increased the tax-free portion of the NPS corpus on maturity from 40 per cent to 60 per cent.
All these benefits have made the National Pension Scheme (NPS) more attractive to government employees.